The Radical Left-Wing Theory That the Government Has Unlimited Money | Hacker News Reader

The Radical Left-Wing Theory That the Government Has Unlimited Money

vice.com

24 pointsKluny19 comments

It's a bit sickening how dismissive the author is to brush aside the impact of inflation on this plan. Inflation is a direct tax on the poor who are trying to save money. Great, let's give them jobs that are dependent on inflation and then remove their ability to gain capital. Runaway inflation is a real contributor to poverty traps, but I must be crazy because according to the article "panic over government budget deficits is delusional, a misguided and atavistic remnant of the gold standard."

Modern macroeconomics comes off as such a tribal, groupthink discipline to me. Far too many policy suggestions stem from tortured analogies like "we need to prime the pump and increase spending to increase aggregate demand!", or "Capitalism runs on sales, ... you have to increase spending to increase sales!" Where is the analysis of the real cost of programs like this? Why are we so focused on short-term results without considering the long-term effects?

Economics is not physics. You can't run controlled experiments and discover mathematical relations that succinctly describe entire economies. I wish we would stop taking the poor excuse of what is currently macroeconomics research, which is basically terrible curve fitting on small sample sizes over a brief historical period sprinkled with whatever ideology the economist subscribes to, and jumping to terrible policy decisions that affect real people.

They are certainly proposing to increase the money available to the poor by much more than the 1% increase in prices that they expect to incur.

"Economics is not physics."

This point is super important. While you can influence demand through macroeconomic twiddling, an economy is unlike many systems in that not only does it react to stimuli, it learns to anticipate that stimuli as well. You have to adjust your strategy to account for this.

It's a bit sickening how dismissive the author is to brush aside the impact of inflation on this plan. Inflation is a direct tax on the poor who are trying to save money.

Not just the poor. My current salary would've put me into the Upper Middle class, verging on upper classes in my youth. Now, it's squarely middle class.

I must be crazy because according to the article "panic over government budget deficits is delusional, a misguided and atavistic remnant of the gold standard

There is a big contingent at Vice and Vox that also want us to think that Antifa are a bunch of good, heroic people.

> Modern Monetary Theory’s basic principle seems blindingly obvious: Under a fiat currency system, a government can print as much money as it likes.

Yes, it can. But that doesn't make it a good idea. Just look at the Weimar Republic, or more recently, Zimbabwe and Venezuela.

Money--like the things you buy with it--has a value. And when there are more and more and more units available, the marginal value of each unit it less. So sure, the government can always print more money. But each dollar printed can buy just a bit less than the one before it. Do it enough, and your currency becomes practically worthless.

Agreed. The argument in the article though is that inflation is so low these days that a bit of quantative easing might not be such a bad thing after all.

Inflation is low because money velocity is at record low levels. Just printing (i.e. borrowing) does not cause inflation. Giving it to the poor or spending it on large infrastructure projects causes an increase of money velocity which combined with printing causes inflation. Without velocity printing just means money is getting parked in a bank account. That has no effect as the money is just sitting there.

There is a huge amount of money in the sidelines ready to be used (MZM - money with a zero maturity) as a result of years of quantitative easing.

What this article is proposing is popping the cork from the quantitative easing bottle. The problem is that once you do it you cant just stop it. When it blows it blows and the built up potential is already insane.

Consider that USD has, for decades, been the world trade currency (the reality is a little more complicated today with the IMF). Basically inflation of USD is diluted across the world because other countries (until recently) needed USD to trade with many other countries.

We can get into conspiracy theory here a bit by noticing that Qaddafi wanted to create a common trade currency for Africa. Saddam Hussein quit trading in USD in favor of EUR. Russian and China agreed to exclude USD from their direct trade in 2014. Notice a pattern? Countries are recognizing that the USD is inflated and trying to move away from it. Those that are small, get invaded. Those that are large get vilified.

All that to say that the US does have a blank check as long as it can dilute the inflation wide enough. Such a situation is uniquely different from the individual countries that only inflate internally.

I think it's the reverse, countries that are villified don't want to use the USD.

Basically inflation of USD is diluted across the world because other countries (until recently) needed USD to trade with many other countries.

Normally, the costs of Hardin's Tragedy of the Commons are distributed among the group. In the case of US Senators and Congressmen, if what you say is true, the costs are outsourced to the rest of the world.

> We can get into conspiracy theory here a bit by noticing that Qaddafi wanted to create a common trade currency for Africa. Saddam Hussein quit trading in USD in favor of EUR. Russian and China agreed to exclude USD from their direct trade in 2014.

Aside from China, which has a currency large enough to become a trade concurrency, these countries were all strategic enemies well before these moves. The decoupling of the USD seems more of geopolitical strategy than economic risk for these countries.

I kind of hate the way this article is titled, considering that literally all the quotes from professional economists involve them saying "oh, this isn't very radical -- we've been saying this for 50 years and nobody has listened".

That and it has been Republicans who really buy into the theory.

Dick Cheney famously argued that "deficits don't matter". Donald Trump said "you never have to default because you print the money".

This has been their M.O. since the 1980s:

  Republicans have long recognized how to use the deficit as a
  political tool. In the 1980s, Ronald Reagan ran up historic
  deficits, mostly through an unprecedented military buildup
  and tax cuts for the wealthy. The Clinton administration,
  egged on by the Gingrich-led Congress, ushered in fiscal
  responsibility, but George W. Bush again obliterated that,
  with another helping of a tax cut-and-military agenda that
  Republicans willingly supported.

  When the Obama administration came in, the narrative
  switched again, with Republicans demanding fiscal probity,
  even amid a time of financial crisis and recession. 

  -- http://www.thefiscaltimes.com/Columns/2015/12/04/Slick-Game-Republicans-Play-Your-Money

If you read the political commentary--on both the right and left--it's the left-wing Democrats left consistently preaching fiscal responsibility and paygo budgeting. But most people still perceive Republicans as deficit hawks and Democrats as profligate spenders.

I suspect the validity of this theory could be tested by imagining what would happen in a society of 10 people.

The size of national governments makes them seem capable of anything. But unless this theory includes a rule that it only applies in societies beyond a certain size (and I didn't see one), it has to work in a society of 10 too, and that scenario we can imagine fairly easily.

If your society of 10 people has one person controlling the majority of the wealth, things might go poorly for that one person.

Yes, probably, but the question is whether things would also go badly for the other 9.

An analogy that is used in the YouTube debate linked from the article is that of a scorekeeper and players of a game. The government is the scorekeeper, and operates according to rules we collectively agree on. Those rules can incentivize certain kinds of behavior. The points that the scorekeeper tracks are "money."

If I, as the scorekeeper, decide to award 100 points to the person who accomplishes X task, I don't "lose" 100 points, nor do I have to "get them" from anywhere. I don't "have" a fixed number of points to give out. I create them by awarding them, and I destroy them by collecting them or allowing you to trade them for things. Privately, you (the players) may also trade points among each other; in this, you are constrained by traditional "budget" thinking (how many points am I getting, and how many can I afford to spend).

For your "society of 10 people," imagine a group of 10 roommates who institute a point system to incentivize good behavior at home. Every month, each roommate has to "pay taxes" of some number of points. When we collectively choose to "pay for public services" with points, what we're doing is setting up rules like "whoever cleans the bathroom gets two points" and "taking out the trash is worth one point". Some people don't want to do chores; perhaps you prefer to create some piece of software for your roommate in exchange for some of his points. If there's ever unemployment--people who can't make enough points, because all the chores are already being done and no one wants to give up their (scarce) points for private services--this indicates that we could have a better "point policy," either by paying for more chores (public services), which the "unemployed" roommates can use to earn their points (all while providing useful services for the entire apartment), or by cutting taxes for those who just barely have enough points now, so that it becomes more reasonable to pay some points to the unemployed for non-essential goods/services.

Doesn't all this presuppose the population continues to trust the currency to be accepted for anything _other_ than debts to government?

You know, like foreign interest and imports?

I would expect Brazil, Zimbabwe, Venezuela and pre-WWII Germany would all be great examples of the government printing a lot of cash to spend and not having it turn out well.

Countries with large foreign debts in currencies they couldn’t print lots of.

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